Lennar Loses More Money, Investors Cheer

Lennar posted a fiscal fourth-quarter net loss of $811 million or $5.12 a share.  The average analyst estimate was for a loss of $1.64 a share.  The stock is rallying nicely.  In my next life, I'd like to be reincarnated as an investor in homebuilder stocks because their perennial optimism never ceases to amaze me.  If there is any certainty in this volatile investing climate, it is that the homebuilders will always rally no matter how much money they lose in a quarter.  I find this remarkable as there is so much working against the builders.  New-home sales in the US fell in October to the lowest level in 17 years and builders broke ground in November on the fewest houses since record-keeping began.  Meanwhile, the number of foreclosures and vacant homes is rising.  Certainly the Fed has taken significant actions to lower interest rates and boost demand for homes.  But with consumer confidence at multi-decade lows and the employment picture so cloudy, people are retrenching and saving for a rainy day.  

One of the fallacies that the real estate industry likes to spread like gospel is that there is all this pent up demand from people who need to buy a home because of personal and family changes.  Nobody "needs" to buy a home, particularly not a new home.  Certainly people want to buy homes when their families expand, but they can always keep renting until they feel far more secure about their financial situation.  Just exactly when consumers begin to feel confident enough about the future to take on the stress and responsibility of a new mortgage, in addition to actually getting approved for a mortgage in this lending environment remains an enormous question mark.